James Pethokoukis

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Lucky this baby didn’t land during the G20 meeting! America’s fiscal judge, the Congressional Budget Office, has produced another nightmare report. The bad news: U.S. debt-to-GDP will hit 858 percent by 2080, roughly ten times today’s level. The “good” news: The economy would implode long before. But avoiding that fate requires just the right balance now between austerity and a push for real, private-sector led economic growth.

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Democrats are reopening the House-Senate conference committee to deal with GOP opposition to the $19 billion tax to pay for the bill. This likely means that Dems not only didn’t have Scott Brown’s vote, but either Susan Collins, Olympia Snowe or Chuck Grassley went from “yes” to “no.” Maybe all of them.

The political calculus for U.S. financial reform is suddenly more complicated. Last Friday’s 5 a.m. Capitol Hill compromise was meant to be the culmination of months of hard-fought wrangling. But Republican Scott Brown’s wavering and Democrat Robert Byrd’s death put the proposal back in jeopardy.

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The political calculus for U.S. financial reform is suddenly more complicated. Last Friday’s 5 a.m. Capitol Hill compromise was meant to be the culmination of months of hard-fought wrangling. But Republican Scott Brown’s wavering and Democrat Robert Byrd’s death put the proposal back in jeopardy. I think the assumption is that Dem “no” votes Cantwell and Feingold will both switch to “yes” so that in the end losing Brown and temporarily losing the WV Dems vote won’t matter. But even though the early spin was that the bill got tougher on Wall Street at the end, bankers aren’t jumping from the windows today. That might irk Cantwell and Feingold and keep them against it. But I doubt it. Give the bill a 80-90 percent chance of passage.

Even near the bitter end, big banks hoped Congress would pull its best punches. But the regulatory reform bill agreed early on Friday by U.S. House and Senate negotiators lands solid blows. Though no knockout, it looks set to constrain Wall Street banks’ risk-taking — and profit.

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Wall Street always knew financial reform was coming. The big banks never really thought there was a chance of killing it, not that they really tried to. In fact, once the effort moved into 2009, they wanted it over sooner rather than later. The longer the process dragged out, the greater the chance of something crazy popping up and the more political and profit damage they took. For instance: The “break up the bank” movement was almost successful. As it is, the Volcker rules and derivatives reform may end up far tougher than their worst-case scenario.

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The U.S. is pushing its G20 counterparts to focus more on growth than deficits right now. Too bad America — or at least Congress — seems to be doing neither. Not only is Uncle Sam on pace to rack up another $10 trillion (at least) in debt over the next decade, but little is being down to boost growth and jobs. The latest: Democrats are now openly talking about extending the middle-class Bush tax for only a couple of years until, you know, when the economy is booming. Of course, we may still have unemployment at 8 percent then. I could see letting the Bush tax cuts expire and then replacing them with a more pro-growth tax policy. But a $3 trillion tax hike? Nothing pro-growth about that.

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Peter Orszag never really seemed to want the job as President Barack Obama’s budget chief. His successor should be just as reluctant, having to deal with the fiscal aftermath of the stimulus and healthcare plans.